I'm an associate editor at Forbes, part of the team responsible for our signature issues: The Forbes 400, Global Billionaires and America's Richest Families. As a writer, I cover these wealthy business builders as well as other entrepreneurs. Before Forbes, I also reported on entrepreneurs for Inc. magazine, and attended Syracuse University's S.I. Newhouse School of Public Communications.

A 40-Year-Old Surf Company Declares Its Brand Is Worthless

It’s a literal wipe-out for Billabong, a venerable surf company founded 40 years ago on Australia’s Gold Coast by a pair of entrepreneurs who designed their first board shorts on a kitchen table. By writing down the value of its namesake and Element brands to zero after another year of astonishing losses, Billabong signals that it considers them worthless.

The unusual move follows what acting CEO Peter Myers says has “clearly been a tumultuous year.” Myers assumed the chief executive job after the resignation of Launa Inman, whose departure, and unclear successor, only complicated the situation for Billabong. Financial filings made this morning show the company’s latest annual loss ($773 million) was more than three times the size of its market capitalization ($229 million), and sales declined 13.5%.

Billabong is one of Australia most widely known retailers, a supplier of gear found on beaches around the world–and certainly on shores here in America. After establishing a cult following at home, Billabong’s Gordon and Rena Merchant expanded overseas in the 1980s and 1990s, riding the wave of increased interest in professional surfing and Australia’s surf culture. Billabong went public, listing in Australia, in 2000 and went on a shopping spree, buy brands like skateboard company Element and Nixon watches. The acquisitions propelled Billabong to a peak valuation of $3.45 billion in 2007. That year Billabong made $150 million on $1.1 billion in revenue.

Just a few years later, Billabong was selling off Nixon–and struggling to stay above water. The company earlier this year agreed to a $294 million refinancing deal with private equity shop Altamont Capital Partners, and is considering a rival offer made by Oaktree Capital Management and Centerbridge Partners. It has also been mulling various takeover offers. Indeed, the rough seas around Billabong make struggles at other retailers with brand-image problems, like Abercrombie & Fitch and J.C. Penney, seem smaller in comparison. In the States, Billabong competes chiefly with PacSun and also with chain retailers like TargetTarget and GapGap.

Overall, Billabong estimates its brands are worth just $80.7 million today, down dramatically from $343 million a year earlier. Much of that decline came from Billabong writing its namesake brand down to zero from $252 million.

After 40 years, the company looks like nothing more than flotsam or jetsam.

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.

Comments

why pay $50 for boarshorts when you can get about the same fit and quality for less than half. All the surf clothing outfits will face the same fate- Quicksilver Reef et al- real surfers were always white t shirts and levis or simple plaid shorts and a t shirt- all bought out of thrift shops. you can’t buy surfer cool- its cool bum look with a surfer/shkate flair..can’t be bought in a ‘surf store’ -only kooks shop there.

I’ve always liked Billabong’s style, but for what they are, their fashions have always been way overpriced – especially to/for the culture that they are supposed to represent. I’m surprised that didn’t go under (pun intended) years ago.

This is an excellent example that “People Buy Brands Not Companies,” and that investors buy companies. One can have a great brand and forget about managing it! A great lesson: Make sure you have a Finance Pro on your team and listen to them periodically! U think?

I definitely do not agree with Billabong’s “worthless” assessment of its namesake company.

Billabong has been spent years and millions of dollars marketing their brand to the world. Billabong represents surfing, the beach, vacations, sexy men and women, and a lifestyle that many people envy. Completely redirecting the focus of the company would allow Billabong to make profits off the image they dedicated so much energy into making.

Billabong is much more than a clothing company, and maybe the company should ditch that path altogether and focus on the brand it has spent so many years and so much money creating. The name Billabong conjures up powerful images with limited negative connotations. While surfers and surfer wannabes may no longer be interested in wearing Billabong clothing, they may be interested in entering Billabong surf competitions, traveling on Billabong surfing excursions, attending Billabong concerts, or using a Billabong Surfer Iphone app.

Having a name that is known the whole world over is no little feat, and if the executives over at Billabong are smart enough to realize this they will start getting creative. If Billabong is so worthless, they can hand the licensing rights over to me, Ginger Enclade at Rougeginger@gmail.com.